In which situation is the comparison approach most effective?

The comparison approach, also known as the sales comparison approach, is most effective in situations where there is a sufficient number of comparable properties that have recently sold. This approach relies heavily on analyzing the market data from similar homes to determine an accurate value for a property.

In the case of a ranch house in a newer subdivision of similar homes, there is likely to be a robust selection of comparable properties that share similar characteristics such as size, age, style, and location. This allows appraisers to draw on recent sales data to assess values effectively. The homogeneity of the subdivision and the proximity of the comparable sales provide a solid basis for accurate comparison, making this the ideal scenario for employing the comparison approach.

In contrast, the other scenarios involve unique or atypical properties or locations that may have fewer similar sales available for comparison. For instance, appraising an old farmhouse in a rural area may present challenges due to a lack of comparable sales in the vicinity, which can diminish the effectiveness of the comparison approach. Similarly, a mansion in a wealthy neighborhood might be unique and have few comparables, complicating the analysis. An apartment in a downtown area, while it may have comparable sales, could introduce more variability in property types and market conditions that could impact a